Washington (AFP) – US President Donald Trump’s move to oust Federal Reserve Governor Lisa Cook marks a direct attempt to politicize the central bank and is “profoundly dangerous,” former Fed chief Janet Yellen warned Wednesday. Her opinion piece in the Financial Times came days after Trump said he was removing Cook from her position over allegations of mortgage fraud.
But Yellen argued that accusations alone do not constitute the kinds of “cause” that allow for the firing of a Fed official. “For Trump to invoke cause here is a fiction; it is a pretext to justify an autocratic power grab,” charged Yellen, who also served as Treasury secretary under former president Joe Biden. “It represents a direct attempt to politicize the Fed, intimidate its leadership and bend monetary policy to the president’s will,” she said.
Trump is sending a “chilling message” to other officials sitting on the bank’s rate-setting Federal Open Market Committee that they could be targeted next if they disagreed with the president’s views, she said. Among Cook’s alleged false statements were claims of two primary residences, one in Michigan and another in Georgia. But the Fed governor has not been charged with a crime and the alleged incidents occurred before she was in her current position.
Cook, the first Black woman to serve on the powerful Fed Board of Governors, has rejected Trump’s unprecedented bid to remove her, saying he had no legal authority to do so. Trump’s targeting of Cook marked a dramatic escalation of his efforts to influence the central bank, after he repeatedly lashed out at Fed Chair Jerome Powell for not slashing interest rates sooner.
On Wednesday, Yellen warned that the Fed’s interest rate decisions would lose credibility if markets believed the central bank was guided by political orders. “Inflation expectations could become unmoored. The dollar’s standing as the world’s reserve currency would be imperilled,” she said. “This strategy will not even succeed in lowering long-term interest rates,” she said. “Quite the contrary; long-term interest rates will probably rise due to higher inflation expectations.”
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